Reward & retain
Staff at all levels expect to be rewarded for their contribution to a business's success, both currently and in the future. In this respect Employee Benefit Trusts, in the shape of Share Trusts and Pension Trusts are widely used as a valuable staff motivational tool and can also offer valuable tax advantages. Typical uses include: the warehousing of shares for use with an employee share incentive plan; deferred discretionary bonuses; and the provision of long term savings (pensions).
Employee Share Trusts (ESTs)
ESTs were originally established offshore for UK companies with the objective of avoiding double taxation, being UK Capital Gains Tax on the trustees on disposal and UK Income Tax on the beneficiary on receipt for the same block of shares. The UK double tax effect has been removed but there remains the potential Capital Gains liability where there are non-UK resident employees. It follows that for UK multinationals with employees based outside the UK, the offshore EST remains an efficient means of benefit provision. It can also be used to pass shares to the UK Trustees of UK based employer incentive schemes, through warehousing of the employer shares.
Pension Trusts
These are the established vehicles for the administration of pension schemes. Their raison d' être is to provide separation of the assets of the employer from those allocated to the provision of employee retirement benefits. This was originally identified with the Defined Benefit (DB') retirement arrangements. With the demise of DB schemes and the advent of Defined Contribution (DC') schemes, this has extended the requirement for the assets contributed for the provision of future retirement benefits to be clearly separated from the assets of the employer, in view of the fact that they will in many cases be contributions from both the employer and the employee.
Why Guernsey?
For more than 25 years Guernsey has been a leading provider of trust solutions for employers wishing to provide Employee Benefits. This service has been developed and enhanced over time so as to provide Employee Benefits for both employees and employers within the Channel Islands, in the UK, and internationally. This type of business has grown not only as a consequence of the quality of service but also based on the legal and regulatory environment, which has worked with the industry to provide support and flexibility where necessary. The regulation, monitoring, and control of independent trustee services, by the Guernsey Financial Services Commission, provides both employers and members with an added sense of security.
Guernsey expertise
Due to the nature of the relationship between the employers and the employees in such schemes, it is essential that those responsible for the safeguarding of the assets, the trustees, are able to exercise their particular role as bon pére' over the assets in their custody and be seen by all members to be acting in a transparent and independent manner.
Professional trustees will therefore provide independence but, as importantly, the skills necessary to have regard to the adequacy and security of investment opportunities being presented to the members, the accurate recording of individual member interests, including provision of regular statements of member benefits and projections of how continued retirement saving will be available to provide benefits at retirement.
The development of the interactive market through the Internet has been taken up by professional trustees and administrators, who in conjunction with investment managers are able to provide individual scheme members with regular updates of their investments including the performance of their fund selections.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
